VANCOUVER, March 8 (Reuters) - U.S. plans for steel and
aluminum tariffs and rising protectionist rhetoric carry
potentially serious consequences and it is too soon to call the
"all clear" even with a temporary exemption for Canada, a Bank
of Canada official said on Thursday.

Reacting to news that U.S. President Donald Trump will push
ahead with tariffs on steel and aluminum imports but exempt
Canada and Mexico, Bank of Canada Deputy Governor Tim Lane said
the trade uncertainty has a dampening effect on the central
bank's outlook, adding that the details of the tariffs remained
fluid.

"I would say we're not in a situation of calling all-clear.
I would say there's still a significant degree of uncertainty
around the future trade regime," Lane told reporters in
Vancouver after a speech highlighting the chilling effect of
trade uncertainty.

Lane also reiterated that the central bank is not on a
pre-set course when it comes to raising interest rates, saying
the bank will view future rate moves cautiously and assess
incoming data.

The speech, a day after the bank held rates, reinforced a
dovish message, and financial markets had little reaction,
overshadowed by the U.S. tariff announcement.

While the Canadian economy was progressing much as
policymakers thought it would, it was appropriate that interest
rates remain below neutral, Lane said in his speech.

"Lane reinforced the cautious tilt in stating that easy
policy is still needed to offset current challenges, meaning
that some accommodation is necessary to keep the economy on
track," CIBC Economics economist Royce Mendes wrote in a note to
clients.

Having raised rates three times since July, the bank was now
assessing four key issues, Lane said - whether rising labor
force participation and investment could create more capacity;
whether inflation dynamics could be changing in the new economy;
why wage growth has been slower than expected; and how high
household debt could change the impact of rate hikes.

In moving gradually, the bank is trying to balance the risk
of undermining economic growth by moving too quickly with the
risk of waiting too long and needing to hike rates sharply to
rein in inflation, Lane said.

He said accommodative monetary policy was working to offset
several factors weighing on demand, including "persistent
competitiveness challenges facing Canadian exports, the chilling
effect of heightened uncertainty about future U.S. trade
policies, and the burden of high household debt levels."
(Additional reporting by Andrea Hopkins and David Ljunggren in
Ottawa; Editing by Peter Cooney and James Dalgleish)